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Incentives Proposed For Kentucky Breeders


by Ann Bullard

Kentucky-based breeders and stallion owners can earn additional monies if a foal bred by them and foaled in Kentucky does well in Four-Year-Old Sweepstakes classes. A new program, one project backed by the Kentucky Equine Education Project (KEEP,) will reward the owners of sires and dams whose offspring tie highest in the classes at the All American Horse Classic.

Founded in May 2004, KEEP's purpose is to promote and protect Kentucky's horse industry; breeders' incentive monies are part of their program. The incentives passed last year by the state legislature not only apply to racing breeds (Thoroughbreds and Standardbreds) but to the smallest of all other breeds. The rationale is simple. In Kentucky, stud fees are subject to six-percent sales tax, an estimated $15 million a year. The program will return those monies to those who pay them.

Racing breeds will receive the lion's share of the pot, as they produce most of the of the stud fee sales tax revenue. However, all breeds represented in the state will receive a pro-rata share. Currently, the monies are divided 80 percent to Thoroughbreds, 13 percent to Standardbreds and seven percent to other breeds.

Each breed association defines the meaning of Kentucky-bred as well as how monies will be distributed. The guidelines for each breed differ greatly and have yet to be approved by the Kentucky Racing Authority, which administers the program. Fund distribution is based on the number of horses of each breed residing within the state, with figures provided by the appropriate breed associations.

Kentucky's Saddlebred breeders scrambled to form the Kentucky Saddlebred Owners and Breeders Association (KSOBA), a charter club approved by the American Saddlebred Horse Association. Don Spear serves as president, with Joan Hamilton, vice president; Melissa Moore, secretary, Misdee Wrigley, treasurer and Redd Crabtree, Al Dix and Fred Sarver as founding directors. Stallion and mare owners must belong to the KSOBA and KEEP in order for their horses to be eligible for incentive funds.

“The club is designed to represent the interest of Kentucky Saddlebred owners and breeders in developing programs for breeder incentive funds newly organized by the Kentucky Legislature,” Spear said. “The law provides for monies to be made available each year for breeds other than Thoroughbreds and Standardbreds. We formed our group to be sure that Saddlebreds get their fair share, and that the money is expended wisely in rewarding Kentucky breeders of top performers.”

According to the American Saddlebred Breeders Association, 8,978 horses foaled since 1985 belong to Kentuckians. In contrast, the Morgan census would be 1,200 to 1,300 and an estimated 29,550 Tennessee Walking Horses are owned by Kentuckians. Quarter Horses outnumber all other non-racing breeds, with an estimated 37,000 Kentucky-owned animals. Figures are inexact as registries often are not notified when a horse dies.

Beginning in 2008, KSOBA proposes to distribute their incentive money through four National Four-Year-Old Sweepstakes classes, currently held at the All American Horse Classic. The proposal still must be approved by the Racing Authority, the American Saddlebred Horse Association Board of Directors and its Sweepstakes Committee.

The proposal would award 70 percent of the monies to the breeder and 30 percent to the stallion owner of the Kentucky-bred horse placing highest in the Five-Gaited, Three-Gaited, Fine Harness and Park Pleasure Sweepstakes classes. The sire must have been standing in the state at the time of conception; the breeder [dam owner at the time of conception] also must be a Kentucky resident. Ownership of the offspring is not a factor.

Spear explained the reasoning behind the seemingly-restrictive definition of Kentucky-bred. “State sales tax revenues are making these monies possible. The state wants these monies to stay in Kentucky and hopefully stimulate breeding. We looked at this and found the one [Sweepstakes] division least funded now is the junior division. We're looking at this as a way of reinforcing that Sweepstakes,” he said, pointing out it is one way to encourage owners and breeders to keep their horses Sweepstakes-eligible. Wrigley, who also serves as Saddlebred representative to the KEEP Board, explained that breeders elected to narrowly define the meaning of Kentucky-bred. “The Racing Authority gave instructions that heavily favored Kentucky residency. Rather than having our definition kicked back, we closely followed their guidelines. We can go back and revise them after the first year.

“We expect to receive between $35,000 and $50,000 this year,” she said. “Stud fees are not very high, so it's nice to give back to the stallion owners. I can speak [about that] because I'm wearing all three hats, stallion owner, breeder and exhibitor. It's nice to see a horse you've bred go out and win. To get a financial reward for breeding the horse is really nice, too, especially if you've sold it as a gangly yearling for $5,000 and it turns into a $500,000 horse years later.”

To better understand how the incentives would work, Saddle Horse Report looked at the 2005 Four-Year-Old Sweepstakes winners. The five-gaited champion, The Light O Love (owned by Californian A.E. Nelson) is by the Willowbank-owned Attaché’s Thunderbolt; Nelson owns her dam and is listed as breeder. Therefore, she would not be eligible for incentive monies. The same scenario applies to the horses in the next six places. The seventh place horse, Hill Country Acres' Lauren's Diamond, is the first to meet all the qualifications. As Hill Country Acres was the breeder, they would receive 70 percent of the incentive money; Sheila Fischer, owner of the sire, The Manipulator, would have received the stallion share.

A similar scenario existed in the Three-Gaited Sweepstakes. Maybe I'm Amazed tied sixth. The mare is by Great Day's Came the Son and out of Eleanor Rigby, both owned by Rigby's Green of Versailles, Ky. The Fitzpatricks would have received the entire Sweepstakes award. Arborlane Tangos Wee Pee stood in Kentucky, making his California owner eligible for incentive monies. He sired the Junior Fine Harness third-place winner, Peetunia, who was bred by Kentuckian Carl Fischer. The highest Park Pleasure Sweepstakes [reserve champion] tie went to Norah Jones, by Kentucky-based Loose Family Trust's Periaptor and bred by Rosalind Kirkpatrick of Rigby's Green.

In contrast, the Morgan Horse definition is quite liberal. Ginny Grulke, who heads the Kentucky Morgan Horse Association, explained their rationale. Their share of the awards will be comparatively low as the Morgan census showed approximately 1,200 to 1,300 registered horses owned by Kentucky residents.

“A Kentucky-bred horse [for us] is any horse by a Kentucky-based sire, out of a dam owned by a Kentucky resident or any horse born in the state. Horses may be shown anywhere in the U.S.,” she said.

If approved, Morgan incentive monies will be divided into two “pots, with 70 percent of the money going into the Morgan Show pot and 30 percent into the open competition pot and paid out on a high point basis. The United States Equestrian Federation maintains records for all Morgan shows and for dressage, reining and carriage driving disciplines at all shows. The top three overall point-getters in the open show section would divide 70-percent of the money; the top point-winner in each open show section would receive one-third of their share,” Grulke explained

The present six-percent tax is paid by stallion owners on all covers, whether or not the breeding takes place within Kentucky. Since June 2005, those monies have been transferred to the Kentucky Racing Authority, which provides funding for the breeders' incentive program.

“There is not much financial impact initially,” Spear, whose Stonecroft Farm raises both Saddlebreds and Morgans, said, “It's a help, a start. If we see it growing enough so we can stimulate other areas, then at that point-in-time we can change it to fund other projects as well.”

The proposed incentives are interesting. What the equine community hopes will follow puts the incentives into the exciting category.

A constitutional amendment to allow casino gambling at race tracks is part of Governor Ernie Fletcher's proposed budget. If passed and approved by voters in a projected November 2006 referendum, annual estimated revenues will total $1.25 billion. Of this, 15.65 percent would be earmarked for the horse business with the balance dedicated primarily to education, healthcare and local government. KEEP Executive Director Jim Navolio estimates the non-racing breed annual share at $12.5 million.

Navolio sees 60 percent of such monies being used for programs related to equine education, capital construction (new venues and maintenance of existing ones) and economic development for equine-related industries. The remaining 40 percent would support programs related to specific breeds.

The KEEP organization has grown from an idea proposed by former Kentucky Governor Brereton C. Jones. Founded as a 501(c)(6) non-profit corporation to promote and protect Kentucky's horse industry, by December 2005, there were 9,200 dues-paying members.

“The Governor started a grassroots organization. We recruited a team leader in each county. That person has gone out and signed up every person they could find in their area to be members of KEEP. That's how the organization was built,” Navolio said. “They raised $3 million through a 2003 stallion service auction. That's what we're running on.

“So much of our money came to the grassroots organization through shows and other equine projects. If they agreed to put out a sign or hand out literature we sent them $500,” Navolio explained. “We reinvested $100,343 in 147 equine programs in 67 counties around the state in 10 months.”

During the 2005 legislative session, KEEP worked with State Senator Damon Thayer of Georgetown, Ky., Chairman of the Senate's Horse Farming Subcommittee, who spearheaded obtaining appropriations for the breeder incentive fund. In addition, they succeeded in getting a sales tax on horses purchased by out-of-state buyers removed. The tax on animals two-years-old and younger caused buyers to move their horses from the state, thus taking away jobs. The organization also supports several bills pending in the legislature which would eliminate taxes on horse sales as well as the sale of embryos and semen, feed, straw, shavings and sawdust and many other now-taxed items used by “persons engaged in raising equine as a business.” Should any of these bills be passed, they would take effect the beginning of the next fiscal year, Aug. 1, 2006.

“The real reason behind push for gaming is we are under threat not only from our own other gaming interests like the lottery [state-sponsored gambling] or charitable gaming, but from border states,” Navolio said.

“There are six riverboat casinos on the Ohio River; wherever there is a boat, there is a bridge from Kentucky. Last year, Kentucky residents paid $236 million in Indiana and Illinois taxes. It's absurd, offensive and unacceptable! The biggest loser is the horse business.

“Our research shows that voters will overwhelmingly support this amendment if they know where the money will go: to education, healthcare and local governments with a small percentage to the horse industry.”

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